Presentation on theme: "Asset Performance Evaluation and Asset Management Strategy."— Presentation transcript:
Asset Performance Evaluation and Asset Management Strategy
Who we? Mervyn Jones, Head of Housing Consultancy Nigel Page, Director, Housing Consultancy
Asset Performance CWAG Decision Making Asset Management Strategy New homes and asset strategy Delivery Mechanisms Future environment
How do you behave? Cobblers and Kwikfit!
Do all properties perform equally?
Understanding the performance of your assets Measure the long term performance of your property portfolio Use modelling techniques to analyse worth to the business plan Provides an objective baseline on which to make investment decisions and demonstrate value for money Identifies properties requiring an option appraisal
So what is effective asset management? In –depth and consistent understanding of: Local markets The long term performance of the overall property portfolio The investment performance of each individual property The outcomes you require Unlocking potential, building capacity, releasing resources
Balancing your objectives: Effective asset management Incorporates the return on your investment The triple bottom line Economic Social Environmental Bearable Social Environment Economic Equitable Sustainable Viable
How do we measure performance and worth? Group similar properties - Asset Groups Separate analysis for non housing assets Assemble data - agree assumptions Generate cash flows Review outputs- sense check Agree candidate list of poor performers and understand performance drivers Agree next steps – e.g. Run scenarios Prepare position statement Asset Management Strategy Programme of Options Appraisals
Results and decisions OPTION APPRAISAL RECOVERY AND IMPROVEMENT PLAN OK TO INVEST OPTIMISE PROCUREMENT
Net cash flow per annum Example of different groups of properties
Output Area Profiles: Future Values
Not all about the money – social returns Source: Savills APE model
Presentation of results - 30 yr NPV in GIS
Additional analysis - yield Green = yield measured by annual gross income / vp value Red = the number of properties at each yield value
Additional analysis – Underlying asset value
Using asset performance to set decision framework Something for something At each letting – series of decisions Preparing for conversions and considering disposal strategies – avoiding delay and maximising value at each letting Flagging/traffic lighting in operations systems Asset registers Key missing information – legal and political constraints on action Asset Group UnitsNPVSoc rentAff rentT/OYieldOMV A9-£4,051£67.04£ %£166,303 B24-£3,412£50.43£ %£128,866 C8-£1,935£51.28£ %£123,800 D89-£1,415£88.50£ %£128,866 E28£414£92.02£ %£128,866 F7£1,264£64.79£ %£128,866 G3£2,357£68.26£ %£128,866 H11£2,806£69.22£ %£94,300 I31£2,856£67.70£ %£107,997 J26£4,499£106.57£ %£128,866 K24£4,942£59.54£ %£128,866 L15£6,782£107.62£ %£128,866 Source: Example from other RP’s use of asset model 17
So what? – active asset management strategy Strengthen business plan Make more efficient use of capital resources available Consider long-term planning for obsolescence Obtain a balance between new build, remodelling & stock investment Test alternative strategies Enable balanced investment decisions and support difficult decision making Communicate reasons to members, staff and residents Assist the organisation in delivering its social, financial and housing objectives
Case study – Circle Housing Group Asset performance evaluation as part of strategy to “Optimise value through assets” Over 50,000 homes across 9 RP partners Data collection and cleansing from multiple sources – data improvement plan now in place Support streamlined decision making and coherent strategy within complex group structure Identify group wide benchmarks for performance improvement Vacant disposals and tenanted transfers Market Value NPV
Case study – Southampton Council Asset performance evaluation linked to regeneration strategy Six estates identified for social/economic reasons Asset performance evaluated to identify land assembly and phasing options Supporting partnership working with RPs and developers combined with direct Council delivery
New homes and asset strategy Increasing Supply is a Duty There is a Duty to Maximise the Use of Public Land Value for Money is being redefined to link to new supply Regeneration is the Best Route to Improved Social Outcomes Regeneration/Redevelopment will be the only way to reduce fuel poverty/carbon dioxide emissions.
2 million homes from Public Land? Knowns: Central Government estate 600,000 GLA land 100,000+ Known Unknowns: NHS300,000+ Local Authorities1,000,000 As many as 2 million homes?
Unknowns: What do we know about LA land? Source: DCLG: Value of LA land and buildings 31 March 2014 Local authorities - 46% of public estate LA Land and Property: DCLG/ Audit Comm £114 bn March 2014 Localis estimates LAs will develop £13.4 billion worth in next five years HRA self financing – regen & densification opportunities
Unknowns: What do we know about LA land? Source: DCLG: Value of LA land and buildings 31 March 2014 Council Housing: £66 billion 2 million houses Self financing – review assets Regeneration and Intensification of council housing - Savills unpublished research More and better housing New streets Strengthen communities
Investment strategy – riding the long term property cycle?? Value uplift potential Unlocking hidden value house prices travel times quality of place
Unknowns: LA Land: How many homes? Not done detailed work – no coherent assets data What order of magnitude? Much local authority land is urban We followed approach similar to public land Scope for intensification/ reconfiguration of operational sites Perhaps another 1m capacity if there is appetite to intensify? 1,000,000
Unknowns: Local Authority Land - Case Study LB Ealing: pulling info together, doing more LB Ealing: Strategic assessment of various council depts land holdings (yellow) alongside HRA land (purple)
Delivery Mechanisms Asset Management Strategies – will need to be much more dynamic APE is a suite of business plans by asset group that add up the HRA Business Plan Integration of asset data into financial plans Stress Testing Asset registers – will need to support much more dynamic activity, including charging and disposal. Options Appraisal – these will have to be widened from modernise/remodel/redevelop to cover develop for market housing and sell vacant/build elsewhere.
Delivery Mechanisms The Debt Cap is not.... Council sponsored companies PWLB borrowing Use of RtB receipts Mixed tenure development Ways Forward – more commercial skills or partnership with private developers and FPRPs?
Delivery Mechanisms ALMO lead or Council lead? These are strategies about capital: improving value and making investment ALMO could be agent, but the Council is the asset owner Managing conflicting interests EG decanting and new letting can be inconvenient to an ALMO
Future environment Lyons Report Elphicke and House Policy Exchange Institution building The Alternative managed decline “Council Estates” look incongruously old fashioned surrounded by improved private street property (with extensions and mega- basements) or ranks of modern tower blocks
Recent clients Over the last 3 yrs we’ve modelled 35 RPs and LAs with a total stock of over 350,000